Women Directors, Family Ownership and Earnings Management in Malaysia

Purpose - The purpose of this paper is to determine whether the representation of women on the boards (WOMBDs) and audit committees is associated with a reduction in the practice of earnings management and whether women are associated with income reducing (conservative) rather than income-increasing (aggressive) earnings management. The authors further argue that family ownership moderates the relationship between the presence of WOMBDs and audit committees and earnings management. Design/methodology/approach - The study uses non-finance firms listed on Bursa Malaysia over a period of four years, i.e. from 2008 until 2011. Findings - The evidence reveals that the presence of WOMBD or audit committee is not associated with a propensity for earnings management. In addition, the evidence also reveals that family ownership does not interact either with WOMBD or with women on the audit committee (WOMAC) to influence the propensity for earnings management. Nevertheless, the additional analyses show that, while women on boards are not associated with income-decreasing accruals, the presence of women on audit committees leads to income-reducing earnings management. The evidence further reveals that family ownership does not interact with either WOMBD or WOMAC to influence income-decreasing earnings management. Originality/value - This study extends prior research on the role of women directors and women audit committee members on earnings management focussing on family ownership. Further, the study also examines the direction of earnings management as opposed to the most prior studies, which mainly focus on the propensity of earnings management.